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Advertising Regulatory Board - Friend or Foe?

  • Africa

    10-06-2021

    We recently represented a local ‘David’ client who was brave enough to stand up to a ‘Goliath’ multinational and in doing so, challenge the constitutionality of the Advertising Regulatory Board (“ARB”) in the commercial court. Said multinational is an active and funding member of the ARB, frequently dragging its competitors through the ARB as opposed to meeting them in the sanctity of the courts. Our client is neither a member nor a funder of the ARB.

    The ARB is a self-appointed, extra-curial body intended to regulate the advertising industry by enforcing a Code of Advertising Practice (“the Code”). Whilst the ARB was constituted with good intentions to curb offensive, harmful, or immoral advertising, and has its place in commercial society, the forum has long since being used as a vehicle by some competitors to stifle an opponent’s business alternatively, ability to sell its goods in the absence of what should ordinarily be enforced by order of a court.

    Amongst several other things, our client argued that the ARB’s Memorandum of Incorporation (“MOI”) is unconstitutional in that it contravenes Section 34 of the Constitution (Access to Courts) and furthermore, that the ARB’s exercise of public power is not sourced in law, thereby rendering its exercise of such public power unlawful.

    By way of background, our client’s troubles with this multinational and the ARB started in early 2019, when the multinational lodged a competitor complaint against our client’s MAQ-SOFT fabric softener. Without going into the detail of the matter, this was a long and arduous fight by our client who initially agreed to change its MAQ-SOFT label, not because it agreed with the merits of the multinational’s complaint but because our client was secure in its knowledge that the success of its fabric softener was not attributable to its use of the descriptor “SOFT” but because of consumer affinity towards its high quality, functional and well-priced hygiene, laundry and cleaning product range (this too, from a convert!). Incidentally, our client had been using the descriptor “SOFT” on its fabric softener for a substantial number of years before the multinational took issue with its use through the ARB.

    Following its experience of procedural and substantive unfairness in the MAQ-SOFT proceedings, our client fully defended a competitor complaint lodged by the multinational complainant in December 2019, this time on the basis that the packaging of our client’s “SECUREX” soap contravened the Code. It was, similarly to the MAQ-SOFT complaint, alleged that our client’s packaging contravened the Code in two respects namely:

    • it exploited the advertising goodwill of the packaging architecture of the multinational’s ‘PROTEX’ soap (clause 8); and;
    • it imitated the complainant’s ‘PROTEX’ packaging architecture (clause 9).

    The Directorate of the ARB agreed with our client’s defense and dismissed the complaint in January 2020. Not unexpectedly, the multinational appealed the decision to the Advertising Appeals Committee (“AAC”) of the ARB. In April 2020, the AAC held that our client’s packaging did contravene clauses 8 and 9 of the Code and our client in turn, took this decision on appeal to the Final Appeals Committee (“FAC”) of the ARB, in May 2020. The FAC dismissed the appeal however, afforded our client additional time to withdraw the “offending packaging”.

    Following this decision, and the often unfathomable and unpredictable processes and procedures adopted by the ARB along the way, our client decided to challenge the FAC’s decision on its merits, by way of review, and incorporated a challenge against the constitutionality of certain aspects of the ARB, in the High Court.

    The main constitutional challenges formulated in our client’s argument were that:

    1. The ARB’s MOI is an agreement solely between the ARB and its members. Non-members are not bound by the MOI and should not be affected by the ARB’s adverse rulings, in the way non-members are currently affected.

    The Code provides that, should a non-member ignore a reasonable request for co-operation, the ARB may issue an Ad-Alert to its members, the effect of which is tantamount to interdictory relief in that none of the ARB’s members (essentially all the major radio and television broadcasters in South Africa, and the print media houses), are permitted to publish any advertisements (found to be unacceptable by the ARB) of the offending advertiser, in any medium.

    2. In terms of the principle of legality, public power can only be validly exercised if it is clearly sourced in law. One of the many constitutional challenges our client brought before the court was that the ARB’s exercise of public power is not sourced in law but rather, in its MOI and the Code, both of which are private agreements that enable the ARB to exercise its powers over members of the ARB. They should not lawfully enable the exercise of public power over non-members.

    3. Clause 3.3 of the Code contravenes Section 34 of the Constitution. Clause 3.3 of the Code unequivocally states that the ARB has no jurisdiction over non-members. However, the ARB contradicts this sentiment by later conferring on itself jurisdiction over non-members (1) if they “submit to its jurisdiction” and (2) if it issues a ruling to its members concerning the advertisement of a non-member, which directs its members not to accept such non-member’s advertisements or to withdraw such advertisements. The assumption of jurisdiction over non-members by the ARB in this manner is an unjustifiable violation and in flagrant contravention of the non-member’s right under section 34 of the Constitution which states that:

    “Everyone has the right to have any dispute that can be resolved by the application of law decided in a fair public hearing before a court or, where appropriate, another independent and impartial tribunal or forum.”

    4. The ARB does not qualify as an adequately independent “tribunal” in terms of section 34. If the ARB proceedings were to qualify as an independent tribunal, the degree of independence should be as high as that required of a court. The ARB is a body established and paid for by its members, who comprise major players in the advertising industry. It is questionable whether funding by a member party does not affect the overall integrity of the process against a non-funding, non-member party.

    Over and above the constitutional challenges raised, our client highlighted the inherent unfairness of the ARB’s processes and procedures, pointing out for example, that the ARB process is not subject to the same evidentiary structures and procedural advantages that passing off, copyright and trade mark infringement claims (which clauses 8 and 9 of the Code essentially come down to) enjoy in a court. The giving of evidence under oath is fundamental to our legal system in order to maintain the integrity of the evidence to be scrutinised. The absence of such an integral evidentiary onus in the ARB runs counter to the proposition for evidentiary rules in a court system, which are in place to preserve the sanctity of fairness of the court system.

    This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.

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